Register company in Poland – which legal form of business activity should you choose?

Choosing the right legal form of running a business when registering a company in Poland is a key decision for any entrepreneur, especially for foreigners looking to establish their business. This choice significantly affects how the business operates, the liability for obligations, taxation methods, and accounting responsibilities. Therefore, it is crucial to carefully analyze your business needs and capabilities before deciding on a specific legal form of business.

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What legal forms of running a business in Poland can you choose from?

Entrepreneurs in Poland can select from several legal forms of business activity, categorized as follows:

• Sole proprietorship (JDG): The simplest and most popular option for individuals wanting to operate independently.
• Civil partnership: Suitable for small groups of partners, offering simplified operating rules.
• Capital companies: Including a limited liability company (LLC) and a joint-stock company, which are ideal for larger ventures.
• Partnerships: Such as general partnerships, professional partnerships, limited partnerships, or limited joint-stock partnerships, which combine elements of personal liability and joint business operations.

Foreigners can establish and operate businesses in Poland, but the process and options depend on their citizenship:

• Citizens of the EU and EEA: Have full access to set up sole proprietorships, partnerships, or capital companies in Poland. They can also open branches or representative offices of foreign companies and provide cross-border services without registering a Polish entity.
• Citizens of the USA and Switzerland: Can freely establish sole proprietorships, partnerships, or companies, as well as open branches and representative offices. However, they are not eligible for cross-border service provision under EU regulations.
• Citizens from other countries: Can set up specific forms of businesses, including limited liability companies, joint-stock companies, partnerships, or sole proprietorships, but may need to meet additional requirements. They can also acquire shares or join existing companies and, in some cases, open branches depending on bilateral agreements between Poland and their home country.

If you’re curious about why registering a company in Poland could be a great choice, we encourage you to check out our article: Register company in Poland: advantages and opportunities.

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Questions worth asking yourself before choosing a specific legal form of business activity in Poland

Before choosing the legal form of business in Poland, reflect on the following:

1. Business goals: Do you plan to operate independently, or are you developing a larger project with a team of partners?
2. Scope of activity: What industry will you operate in, how large will the company be, and do you intend to hire employees?
3. Initial capital: What resources do you have, and how much can you invest in starting your business?
4. Liability for obligations: Are you prepared to take full responsibility with your personal assets, or would you prefer to limit your liability?
5. Taxation and accounting: Which tax system will be most beneficial for you, and do you prefer simplified or full accounting methods in Poland?

By thoroughly evaluating these factors, you can ensure that the process to register your company in Poland aligns with your long-term business objectives. This step will not only help you comply with Polish regulations but also lay a solid foundation for your venture’s success.

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Legal forms of business activity in Poland – advantages and disadvantages

1. Sole proprietorship (JDG)

A sole proprietorship is the simplest legal form of business in Poland, where an entrepreneur operates under their own name. Registration is done through the Central Registration and Information on Economic Activity (CEIDG), and the owner is personally liable for the business’s obligations.

Who is it recommended for?

• Individuals running their business independently, such as freelancers, consultants, or specialists in various fields.
• Small businesses that do not plan to build a large team or complex organizational structure.

Advantages:

• Simple registration: The registration process is quick and involves minimal formalities. You can register your business online via CEIDG.
• Low operating costs: Administrative and tax costs are relatively low, and the entrepreneur can choose their preferred taxation method.
• Full control: The owner has complete autonomy in making business decisions and managing the company.

Disadvantages:

• Personal liability: The entrepreneur is fully liable for the company’s obligations with their personal assets, which can pose a significant risk.
• Limited growth potential: While suitable for small businesses, this structure may hinder growth, especially when seeking substantial financing.
• No separation of personal and business assets: Financial management can be challenging due to the close connection between personal and business finances.

2. Civil partnership

A civil partnership is a legal form of business where partners jointly run a business. It is popular among small entrepreneurs and family-run businesses.

Who is it recommended for?

• Small entrepreneurs looking to collaborate with others in a shared business.
• Individuals seeking simplicity and flexibility in management.

Advantages:

• Easy registration: A civil partnership does not require registration in the National Court Register (KRS), reducing formalities.
• Low start-up and operational costs: There is no obligation to contribute a minimum share capital, making it an affordable option.
• Flexibility: Partners can freely determine the rules of the partnership, adapting them to their needs and expectations.

Disadvantages:

• Joint liability: Partners are personally liable for the partnership’s obligations, including with their private assets.
• Challenges in obtaining financing: Civil partnerships are often viewed as less credible by banks and financial institutions, making it harder to secure loans or funding.
• Profit sharing: Profits must be divided among partners, regardless of their individual contributions to the business or investments.

3. Limited liability company (LLC)

A limited liability company is one of the most popular legal forms of running a business in Poland, especially for entrepreneurs seeking to limit personal liability. It is a corporate entity where shareholders are only liable up to the amount of their contributions.

Who is it recommended for?

• Entrepreneurs planning to grow their business while protecting their personal assets.
• Business owners intending to collaborate with investors or take out loans.

Advantages:

• Limited liability: Shareholders’ personal assets are protected, as they are only liable up to their contributions.
• Easier access to capital: Limited liability companies can more readily secure loans or attract investors.
• Business continuity: The company remains operational even if there is a change in shareholders, ensuring stability over time.

Disadvantages:

• Higher costs: Establishing and maintaining a limited liability company involves higher initial expenses (e.g., required share capital) and costs associated with mandatory accounting and audits.
• Formal requirements: The company must maintain full accounting records, which adds administrative responsibilities.
• Corporate governance: It requires the establishment of management bodies, such as a board of directors, and shareholder resolutions, which can complicate decision-making in smaller companies.

If you are considering setting up a limited liability company, we invite you to read our article: Register company in Poland – Limited liability company (LLC).

4. Joint-stock company

A joint-stock company is a legal form of business activity recommended for large enterprises requiring a corporate structure and planning to raise capital or enter the stock market.

Who is it recommended for?

• Companies with substantial initial capital (at least PLN 100,000) and a need for corporate governance.
• Businesses planning to attract external investors or go public.
• Enterprises aiming to attract key employees through stock options.

Advantages:

• Credibility: Distinguished market presence and strong brand reputation.
• Limited liability: Shareholders are only liable up to the value of their shares.
• Attractive to investors: The joint-stock company appeals to external investors due to the easy transferability of shares.
• Ability to raise significant capital: By issuing shares, the company can quickly and effectively secure large amounts of capital, vital for growth, investment, or international expansion.

Disadvantages:

• High costs: Significant expenses for establishment, operations, and legal services.
• Complex management: Involves multiple bodies, such as the management board, supervisory board, and general shareholders’ meeting.
• Lack of privacy: Financial statements must be published, making the company’s financial and operational details publicly accessible.
• Control dispersion: With many shareholders, original owners may lose control of the company. Shares’ free transferability can result in strategic decisions being made by new owners whose interests may not align with the founders.

5. General partnership

A general partnership is a simple business form where partners run a business together and are personally liable for its obligations. It is one of the simplest commercial company types, offering flexibility in management.

Who is it recommended for?

• Entrepreneurs planning a larger business than a sole proprietorship or civil partnership.
• Individuals ready to share responsibility for the company’s obligations.
• Businesses valuing trust and market credibility.

Advantages:

• Credibility: Viewed as more stable than a sole proprietorship, enhancing market trust.
• Management flexibility: Partners can determine the partnership’s functioning rules themselves.
• Ease of transferring shares: Transfers between partners don’t require changing the partnership agreement.

Disadvantages:

• Unlimited liability: Partners are personally liable for the partnership’s obligations, risking personal assets if the business faces financial challenges.

6. Professional partnership

A professional partnership is tailored for professionals such as doctors, lawyers, or architects. It protects partners’ personal assets while maintaining a commercial company structure.

Who is it recommended for?

• Professionals operating in regulated fields (e.g., attorneys, physicians).
• Individuals wishing to safeguard personal assets.

Advantages:

• Asset protection: Partners are only liable with the partnership’s assets, safeguarding personal property.
• No minimum capital: Establishment costs are lower due to the lack of minimum capital requirements.
• Ease of transferring shares: Ownership changes don’t require amendments to the partnership agreement.

Disadvantages:

• Limited flexibility: Available only to specific professional groups, restricting its applicability.
• No legal personality: The partnership lacks full legal capacity, complicating certain legal processes.

7. Limited partnership

A limited partnership consists of two types of partners: general partners (with unlimited liability) and limited partners (with liability limited to their contributions). It’s ideal for businesses wanting to divide responsibility.

Who is it recommended for?

• Entrepreneurs looking to split responsibilities and resources.
• Businesses combining full liability for some partners with limited liability for others.
• Companies seeking investors without relinquishing management control.

Advantages:

• Flexibility: Allows differentiation in involvement and responsibility between general and limited partners.
• Ease of transferring shares: Limited partners can transfer shares freely, facilitating capital management.

Disadvantages:

• Unlimited liability: General partners bear full liability for the partnership’s obligations.
• Potential conflicts: Differences in objectives between general and limited partners may lead to disputes.
• Management difficulties: Large numbers of limited partners can complicate decision-making.

8. Limited joint-stock partnership

This form combines elements of a limited partnership and a joint-stock company, attracting investors through shares while keeping full liability with general partners.

Who is it recommended for?

• Companies seeking investors without surrendering full management control.
• Entrepreneurs wanting to blend the characteristics of a joint-stock and limited partnership.

Advantages:

• Ease of transferring shares: Shares can be bought or sold without altering the partnership structure.

Disadvantages:

• Complex structure: Requires advanced legal arrangements, making management and compliance challenging.
• Costs: Establishing and running a limited joint-stock partnership is more expensive than simpler business forms, such as a limited liability company.

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Summary – Choosing the right legal form of running a business in Poland

When considering how to register a company in Poland, it’s essential to think about how your choice of legal form of business activity will impact the future of your enterprise.

Entrepreneurs often weigh options like sole proprietorship, limited liability company (LLC), or other forms of business entities. Each has unique characteristics, advantages, and disadvantages that should be carefully analyzed before making a decision.

Did you know that a sole proprietorship is the simplest form of business in Poland but comes with full personal liability for the company’s debts? Or are you wondering about the complexities of establishing an LLC and whether the additional costs are worth the financial protection it provides?

The right choice depends on various factors, such as your planned business scale, expected number of employees, and your tolerance for financial risk. If your ambitions include expansion or attracting investors, a limited liability company might be the most advantageous option. On the other hand, if simplicity and low initial costs are your priorities, a sole proprietorship could be the ideal path. It’s important to align your decision with your business goals and your comfort level with financial management and legal responsibilities. What legal form of business do you envision for your company in the coming years?

If you’re considering registering a company in Poland and need expert assistance, getsix® provides some of the best company registration services available. Our comprehensive approach ensures full support at every stage, from legal consultation to finalizing registration in compliance with Polish regulations. Contact us today.

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If you have any further questions or require additional information, please contact your business relationship person or use the enquiry form on the HLB Poland website.

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